It’s time to question the soundness of continued zealous investment in the Magnificent Seven, one top economist warns.
“The textbook idea that the S&P 500 gives you a diversified exposure to risk is just simply no longer the case,” Sløk told Fortune. “You are very focused and concentrated in a small group of names, in particular in tech, making up such a significant share of your overall risk exposure.”
“One should have some exposure to the S&P 500 and should certainly also have some exposure to AI,” Sløk said. “But it’s very clear that [due to] the market’s extreme focus and concentration on this story, this is the time to have a conversation around, What are the things I should be doing with my money?”
Mounting concerns about the ramifications of a growing AI bubble coincide with the unraveling of the Magnificent Seven stocks.
“We’re beginning to have conversations about the ‘Magnificent Six’, maybe it’s only five,” Sløk said. “This is also just telling you that the Magnificent Seven are seven very, very different companies that have very different businesses.”
Ahead of next week’s earnings reports for Meta, Apple, and Microsoft, analysts are continuing to scrutinize the pricing of these companies’ stocks, assessing if there are other options in the tech sector worth buying into.
“AI will continue to have a dramatic impact on all our lives,” Sløk wrote in his blog post. “But the question remains whether the Magnificent Seven are correctly priced, and if they will even be the best AI investments over the next five to ten years.”
